EBay's tax affairs: Legal but utterly immoral

The e-commerce giant paid just £1.6m in UK corporation tax last year 

James Moore
Chief Business Commentator
Wednesday 11 October 2017 15:46 BST
Controversy has been generated over eBay's tax affairs
Controversy has been generated over eBay's tax affairs (Getty Images/iStockphoto)

Yet another US internet giant is in the midst of a storm over tax, and no wonder.

EBay, a company that recorded UK revenues of $1.3bn (£980m) last year, according to the company’s US annual report, paid just £1.6m to the UK exchequer according to UK accounts filed at Companies House.

They show that the company’s revenues increased by 8 per cent to £200m in 2016, but that the profit it made on them fell by 5 per cent to £7.6m on which corporation tax was levied.

Why the very obvious discrepancy between what the filings in this country show and what appears in the US annual report?

The UK business generates its revenues through the provision of marketing and advertising services to the Swiss based eBay International.

But this is only one of the company's two main revenue lines. The other is the commissions it generates on users’ sales. It would appear that these are routed through Switzerland, where eBay International is based, and where corporation tax rates are appreciably lower than even the very generous regime that operates in the UK.

EBay has, of course, defended itself by saying that it is fully compliant with the law. And that may be true. But whether its practices are morally defensible, and acceptable, is another matter entirely. .

Frankly, if eBay can generate revenues of £980m in this country and legally pay tax of just £1.6m, then the law is an ass.

Those numbers are grotesque. There is something deeply wrong with a system that allows multinational giants to pick and choose jurisdictions so that they are able to pay a fraction of what local businesses in the territories they operate pay.

Small wonder the people get cross, and start listening to the blandishment of populists promisng to tear down a rigged system.

With an eye on their reputations, and the negative PR impact their disclosures have had, other such companies have sometimes voluntarily agreed to pay a bit extra. But only a bit.

Assuming eBay’s figures generate a lot of fuss - and they really ought to - you might expect to see questions in the House, even a select committee inquiry. All this might lead to something similar.

Even if that happens, it won’t solve the underlying problem of these stateless corporations being able to legally pay a fraction of the tax local businesses in many of the territories in which they operate have to stump up.

The problem has been festering for years now. While moves have been made towards addressing it by organisations such as the OECD, the EU, and even the UK authorities, EBay's numbers only serve to demonstrate that it is an awfully long way from being solved.

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